Workday (WDAY) – Mispriced with 30%+ Margin Potential Ahead?

In its second-quarter 2026 investor letter, Eagle Capital Management highlighted Workday, Inc. (NASDAQ:WDAY), a leading enterprise software company that provides cloud applications for human resources and financial management. The company has a market capitalization of $47.09 billion and closed at $190.64 per share on August 18, 2026.

According to Eagle Capital Management, Workday, Inc. (NASDAQ:WDAY) is a resilient and highly entrenched company in the application software industry, with mid-teen margins that are expected to increase to 30% or higher in the long term. The founder’s return to the CEO role has reignited product innovation, and the firm believes that AI will be a net positive for the company’s business, enabling it to play offense through geographic expansion, adjacent-product extensions, and natural-language querying for business results.

The portfolio trades at a 20% market discount with faster expected EPS growth, and Eagle Capital Management expects EPS growth in the high teens, driven by revenue growth, operating leverage, and share buybacks. However, the company’s shares have gained -16.20% over the past 52 weeks, and the firm is recycling capital toward attractive opportunities outside the most crowded AI trades while maintaining selective exposure to high-quality beneficiaries.

Workday, Inc. (NASDAQ:WDAY) is not on our list of the 40 Most Popular Stocks Among Hedge Funds, but it has been held by 63 hedge fund portfolios at the end of the first quarter, which was 70 in the previous quarter. While we acknowledge the potential of Workday, Inc. (NASDAQ:WDAY) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk.

Eagle Capital Management stated, ‘Software is controversial due to fears of Al-driven disruption. Al makes it easier to build software and will change workflows in how it is used. We believe there will be heightened competition and greater separation between winners and losers over the coming years. The industry is deservedly trading at a higher risk premium, but within the market there are plenty of mispricings.’

The companies we own are resilient and highly entrenched in application software. We view them as offering upside optionality. Workday, Inc. (NASDAQ:WDAY), a leading HCM and financials platform, earns mid-teen margins on a business that should have long-term margins of 30% or higher. The founder’s return to the CEO role is reigniting product innovation, and we increasingly believe Al will be a net positive for their business, enabling them to play offense. Examples include geographic expansion, adjacent-product extensions, and natural-language querying for business results. We expect EPS growth in the high teens, driven by revenue growth, operating leverage, and share buybacks.’

The firm also highlighted that the industry is trading at a higher risk premium, but within the market, there are plenty of mispricings. Eagle Capital Management believes that the companies they own are resilient and highly entrenched in application software, offering upside optionality. The firm expects Workday, Inc. (NASDAQ:WDAY) to earn mid-teen margins on a business that should have long-term margins of 30% or higher, driven by revenue growth, operating leverage, and share buybacks.